Halifax reports 2.3% drop in house prices but says lack of mortgages mean 2009 "will be another difficult year"

06 March 2009 / by Rachel Mason

House prices have fallen a further 2.3 per cent in the past month but until mortgages become more readily available the drop will do little to ease the market, says the UK's biggest lender.

According to Halifax – now part of Lloyds Banking Group – the average UK house price fell from, £164,126 in January to £160,327 in February. The drop marks a 2.3 per cent monthly fall and an annual change of -17.7 per cent.

"The average UK house price declined by 2.3 per cent in February. This monthly decrease more than offset January's two per cent increase," said Martin Ellis, housing expert at Halifax.

"Prices in the three months to February compared to the previous quarter, which provides a better indicator of the underlying trend, were 3.6 per cent lower."

Mr Ellis says that although there has been a marked decline in house prices, the results hint at some sort of market stabilisation.

"Whilst market activity remains at very low levels, there are some tentative signs that activity may be beginning to stabilise. The house price to earnings ratio - a key measure of housing affordability - has fallen to its lowest level for six years," he said.

However, although lower prices – according to Halifax, the average UK house price is now close to 2004 levels – should, in theory, make buying a house more affordable, the lack of mortgages is still creating a hurdle, as Mr Ellis explains:

"Continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are, however, likely to mean that 2009 will be another difficult year for the housing market."